CSAV reports smaller first quarter loss

CSAV said it had a net loss of $66 million in the first quarter of 2014, 31.3-percent less than in the same period of 2013, when the loss was $96 million.
Revenue in the first quarter of 2014 was $745 million, compared to $877 million in the same 2013 period.
The Chile-based container shipping company, which is in the process of merging with the German carrier Hapag-Lloyd, noted that the results “were obtained in the context of a 10.6-percent reduction in freight rates compared to the first quarter of 2013.”
The company also noted that there was a deterioration in the performance of “special services” — the operation of car carriers and reefers, which will not be a part of the merger with Hapag-Lloyd.
On the other hand, the volume carried by the company rose by 1.8 percent compared to the first quarter of 2013, amid a reduction of container costs of 9 percent.
The chief executive of CSAV, Oscar Hasbún, said that the results are in line with the company’s projections. “In the context of a very complex freight rate scenario for the industry, our company continues to show a significant improvement in its cost structure, which allows us to absorb part of the freight reduction.”
Freight rates as measured by the Shanghai Container Freight Index have improved in April and May, but the company said that on the East Coast of South America, a significant market for CSAV, an imbalance in supply and demand has continued, exacerbated by weak demand from Brazil, bringing rates to a historically low level.
CSAV’s improved results are a result of cost reductions, better vessel utilization, and the introduction of larger, more efficient ships, it said. The company has introduced 8,000-TEU ships into its fleet that it had chartered out to Maersk and will add seven new 9,000-TEU ships to its fleet between this November and May 2015.
The company said it expects the container shipping market to remain volatile in the coming year, with the oversupply of vessels at the beginning of the year to be similar to the levels in 2013.
The merger of CSAV with Hapag-Lloyd will create the fourth-largest container shipping company in the word, and the companies estimate the value of the synergies of the two companies to be $300 million in cost savings.
The companies also expect to use $1 billion in capital increases after the merger to invest in its fleet in order to become more efficient and better compete with the P3 Network being formed by Maersk, MSC, and CMA CGM and other global companies.
Neither CSAV nor Hapag-Lloyd immediately commented on how the companies will market services going forward and whether the CSAV brand will be retained for container shipping or whether all business will be done under the Hapag-Lloyd name.
“We cannot comment on this before all regulatory approval is achieved. Until the closing, both companies are still seen as separated businesses,” said a Hapag-Lloyd spokesman.